Bill Text: TX HB4536 | 2021-2022 | 87th Legislature | Introduced
Bill Title: Relating to the consideration of pecuniary factors in certain state investments.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2021-03-29 - Referred to Pensions, Investments & Financial Services [HB4536 Detail]
Download: Texas-2021-HB4536-Introduced.html
By: Middleton | H.B. No. 4536 |
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relating to the consideration of pecuniary factors in certain state | ||
investments. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 802.001, Government Code, is amended by | ||
adding Subdivisions (5), (6), and (7) as follows: | ||
(5) "Pecuniary Factor" means a factor that a governing | ||
body or investment manager, operating as the fiduciary in | ||
accordance with Chapter 802, Government Code, has determined is | ||
expected to have a material effect on the risk or return of an | ||
investment based on appropriate investment horizons consistent | ||
with the investment objectives of a plan established in accordance | ||
to Chapter 802, Government Code, and the funding policy established | ||
by Sections 802.2011 and 802.208. | ||
(6) "Funded ratio" means the ratio of a public | ||
retirement system's actuarial value of assets divided by the | ||
system's actuarial accrued liability. | ||
(7) "Governmental entity" has the meaning assigned by | ||
Section 802.1012. | ||
SECTION 2. Section 802.002, Government Code, is amended to | ||
read as follows: | ||
Sec. 802.002. EXEMPTIONS. (a) Except as provided by | ||
Subsection (b), the Employees Retirement System of Texas, the | ||
Teacher Retirement System of Texas, the Texas County and District | ||
Retirement System, the Texas Municipal Retirement System, and the | ||
Judicial Retirement System of Texas Plan Two are exempt from | ||
Sections 802.101(a), 802.101(b), 802.101(d), 802.102, 802.103(a), | ||
802.103(b), 802.2015, 802.2016, 802.202, 802.203, 802.204, | ||
802.205, 802.206, and 802.207. The Judicial Retirement System of | ||
Texas Plan One is exempt from all of Subchapters B and C except | ||
Sections 802.104, [ |
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retirement program governed by Chapter 830 is exempt from all of | ||
Subchapters B and C except Section 802.106 and 802.208. | ||
(b) If a public retirement system or program that is exempt | ||
under Subsection (a) is required by law to make an actuarial | ||
valuation of the assets of the system or program and publish | ||
actuarial information about the system or program, the actuary | ||
making the valuation and the governing body publishing the | ||
information must include the information required by Section | ||
802.101(b). | ||
(c) Notwithstanding any other law, a defined contribution | ||
plan is exempt from Sections 802.101, 802.1012, 802.1014, 802.103, | ||
802.104, and 802.202(d). This subsection may not be construed to | ||
exempt any plan from Section 802.105, [ |
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(d) Notwithstanding any other law, a retirement system that | ||
is organized under the Texas Local Fire Fighters Retirement Act | ||
(Article 6243e, Vernon's Texas Civil Statutes) for a fire | ||
department consisting exclusively of volunteers as defined by that | ||
Act is exempt from Sections 802.101, 802.1012, 802.1014, 802.102, | ||
802.103, 802.104, and 802.202(d). This subsection may not be | ||
construed to exempt any plan from Section 802.105, [ |
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and 802.208. | ||
(e) Notwithstanding any other law, a retirement system, | ||
program, or plan that is exempt under Subsections (a), (c), and (d) | ||
is not exempt from Sections 802.202(d)(1), 802.203(a)(4), and | ||
802.205(d)(6), as applicable, for the purpose of compliance with | ||
Section 802.208. | ||
SECTION 3. Section 802.106, Government Code, is amended by | ||
adding Subsection (i) to read as follows: | ||
(i) A public retirement system shall distribute to each | ||
active member and retiree a summary of any investment or investment | ||
course of action in accordance to Section 802.208. | ||
SECTION 4. Section 802.107, Government Code, is amended by | ||
amending Subsection (c) to read as follows: | ||
(c) A public retirement system shall post on a publicly | ||
available Internet website: | ||
(1) the name, business address, and business telephone | ||
number of a system administrator of the public retirement system; | ||
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(2) a copy of the most recent edition of each report | ||
and other written information that is required by this chapter or | ||
Chapter 801 to be submitted to the board; and | ||
(3) a copy of a summary of any investment or investment | ||
course of action in accordance to Section 802.208. | ||
SECTION 5. Section 802.2011, Government Code, is amended to | ||
read as follows: | ||
Sec. 802.2011. FUNDING POLICY. [ |
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(1) adopt a written funding policy that details the | ||
governing body's plan for achieving a funded ratio of the system | ||
that is equal to or greater than 100 percent; | ||
(2) maintain for public review at its main office a | ||
copy of the policy; | ||
(3) file a copy of the policy and each change to the | ||
policy with the board not later than the 31st day after the date the | ||
policy or change, as applicable, is adopted; and | ||
(4) submit a copy of the policy and each change to the | ||
policy to the system's associated governmental entity not later | ||
than the 31st day after the date the policy or change is adopted. | ||
SECTION 6. Section 802.202, Government Code, is amended by | ||
amending Subsection (d) to read as follows: | ||
(d) The governing body of a public retirement system shall: | ||
(1) develop and adopt a written investment policy, in | ||
accordance with Section 802.208; | ||
(2) maintain for public review at its main office a | ||
copy of the policy; | ||
(3) file a copy of the policy with the State Pension | ||
Review Board not later than the 90th day after the date the policy | ||
is adopted; and | ||
(4) file a copy of each change to the policy with the | ||
State Pension Review Board not later than the 90th day after the | ||
change is adopted. | ||
SECTION 7. Section 802.203, Government Code, is amended by | ||
amending Subsection (a) to read as follows: | ||
(a) In making and supervising investments of the reserve | ||
fund of a public retirement system, an investment manager or the | ||
governing body shall discharge its duties solely in the interest of | ||
the participants and beneficiaries: | ||
(1) for the exclusive purposes of: | ||
(A) providing benefits to participants and their | ||
beneficiaries; and | ||
(B) defraying reasonable expenses of | ||
administering the system; | ||
(2) with the care, skill, prudence, and diligence | ||
under the prevailing circumstances that a prudent person acting in | ||
a like capacity and familiar with matters of the type would use in | ||
the conduct of an enterprise with a like character and like aims; | ||
(3) by diversifying the investments of the system to | ||
minimize the risk of large losses, unless under the circumstances | ||
it is clearly prudent not to do so; [ |
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(4) by considering only pecuniary factors in the | ||
evaluation of an investment or investment course of action; and | ||
(5) in accordance with the documents and instruments | ||
governing the system to the extent that the documents and | ||
instruments are consistent with this subchapter. | ||
SECTION 8. Section 802.204, Government Code, is amended by | ||
amending Subsection (c) to read as follows: | ||
(c) In a contract made under this section, the governing | ||
body shall specify any policies, requirements, or restrictions, | ||
including criteria for determining the quality of investments and | ||
for the use of standard rating services in accordance with Section | ||
802.208, that the governing body adopts for investments of the | ||
system. | ||
SECTION 9. Section 802.205, Government Code, is amended by | ||
amending Subsection (d) to read as follows: | ||
(d) If the governing body enters into a contract under | ||
Subsection (a) with a brokerage firm, the firm must: | ||
(1) be a broker-dealer registered with the Securities | ||
and Exchange Commission; | ||
(2) be a member of a national securities exchange; | ||
(3) be a member of the Securities Investor Protection | ||
Corporation; | ||
(4) be registered with the State Securities Board; | ||
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(5) maintain net regulatory capital of at least $200 | ||
million; and | ||
(6) only consider pecuniary factors in the evaluation | ||
of an investment or investment course of action. | ||
SECTION 10. Subchapter B, Chapter 802, Government Code, is | ||
amended by adding Section 802.208 to read as follows: | ||
Sec. 802.208. INVESTMENT POLICY REQUIREMENTS AND | ||
RESTRICTIONS. (a) The governing body of a public retirement system | ||
shall create an investment policy or investment course of action | ||
pursuant to this section. | ||
(b) An investment policy or investment course of action | ||
under Subsection (a) shall: | ||
(1) instruct investment managers or persons with a | ||
fiduciary responsibility, established under Section 802.203, to | ||
consider only pecuniary factors in the evaluation of an investment | ||
or investment course of action; and | ||
(2) establish a plan for the divestment from any | ||
indirect holdings in actively or passively managed investment funds | ||
or private equity funds that have been evaluated using factors | ||
other than pecuniary factors, not in accordance with this section. | ||
(c) An investment or investment course of action made on | ||
behalf of, for the benefit of, or in relation to a public retirement | ||
system shall not be evaluated considering factors other than | ||
pecuniary factors, except as provided by Subsection (d). | ||
(d) If the evaluation of an investment or investment course | ||
of action, in accordance with Subsections (b) and (c), determines | ||
that investments or investment courses of action would have an | ||
indistinguishable material effect on the risk or return of an | ||
investment or investment course of action, the investment manager | ||
or person with a fiduciary responsibility, established under | ||
Section 802.203, may consider factors other than pecuniary factors | ||
to evaluate an investment or investment course of action. | ||
(e) If an investment manager or person with a fiduciary | ||
responsibility established under Section 802.203 considers factors | ||
other than pecuniary factors under Subsection (d), the investment | ||
manager or person with a fiduciary duty shall document: | ||
(1) the reason pecuniary factors were insufficient in | ||
the evaluation; | ||
(2) a comparison of the investment or investment | ||
course of action with alternative investments or investment courses | ||
of action; and | ||
(3) the factors other than pecuniary factors | ||
considered in the evaluation of an investment or investment course | ||
of action. | ||
(f) Any documented use of factors other than pecuniary | ||
factors in the consideration of an investment or investment course | ||
of action, in accordance to Subsection (d), shall: | ||
(1) be published in a monthly report; and | ||
(2) be prominently available on the Internet website | ||
of the public retirement system. | ||
(g) Not later than January 5 of each year, each state | ||
governmental entity shall file a publicly available report with the | ||
presiding officer of each house of the legislature and the attorney | ||
general that: | ||
(1) identifies all securities sold, redeemed, | ||
divested, or withdrawn in compliance with this section; and | ||
(2) identifies all prohibited investments under this | ||
section. | ||
(h) This section applies to all public retirement systems. | ||
SECTION 11. This Act takes effect September 1, 2021. |